Lithium prices have rebounded sharply after a three-year downturn, driven by growing demand for electric vehicles (EVs), energy storage systems, and strategic stockpiling by governments. Industry experts see the market as balanced but remain cautious about volatility in what is often described as a highly cyclical commodity.
Jeremy Lin, portfolio manager at Purpose Investments Inc. in Toronto, has taken a bullish stance on lithium since March, citing short- and long-term drivers. He points to higher gas prices resulting from the ongoing conflict in Iran, which have accelerated EV adoption in Europe and Asia. Lin also notes an improved supply-demand outlook, projecting about 10 percent annual growth in lithium demand over the next five years. He highlights the potential for lithium to move into a supply deficit by 2027 as growth in electric vehicles and energy storage intensifies.
The supply side has seen significant shifts, particularly in China, the world’s dominant lithium consumer and processor. Following a regulatory crackdown last August aimed at curbing price wars and overcapacity, China tightened mining permits and halted operations at key sites, including Contemporary Amperex Technology Co. Ltd.’s Jianxiawo mine, which accounts for roughly 3 percent of global lithium output. Market speculation about a possible reopening has contributed to recent price fluctuations but remains unconfirmed. Meanwhile, Zimbabwe, Africa’s top lithium producer, suspended raw ore exports in February and plans to ban exports of lithium concentrates from January next year to encourage local processing.
Battery-grade lithium carbonate currently trades near US$21,400 per tonne, down from a May peak of around US$29,200 and well below the record US$84,525 reached in 2022. Prices plunged to about US$8,260 per tonne last August amid excess supply before rebounding on regulatory interventions and shifting market dynamics.
Jacob White, director of ETF Management at Sprott Asset Management LP, describes the lithium market as more balanced, with EVs accounting for 66 percent of demand and battery energy storage systems about 15 percent. White observes that while the removal of the US$7,500 federal EV tax credit has dampened demand in the United States, adoption continues to rise globally. He also highlights increased lithium demand linked to grid-scale energy storage systems, driven in part by the Iran conflict's impact on energy security. Governments are responding with strategic metal stockpiling initiatives, including the US government’s Project Vault, a US$12-billion program launched this year to create critical metals reserves incorporating lithium. The US has also recently acquired stakes in Lithium Americas Corp. and its Thacker Pass lithium project, North America’s largest known deposit.
Market volatility remains a key concern. White notes that while the Sprott Lithium Miners ETF gained 128 percent over the past year, its price remains down from a 2023 peak. Similar wild swings have occurred in Canadian-listed lithium ETFs.
Seth Goldstein, senior equity analyst at Morningstar Research Service LLC, calls the current lithium market balanced but prone to significant price swings depending on developments such as mine restarts in China. He expects long-term prices to settle around US$20,000 per tonne, with fluctuations above and below that level. Goldstein covers major lithium producers including Albemarle Corp., the world’s largest lithium producer based in the US, and Sociedad Quimica y Minera de Chile SA. Although cautious on the near-term outlook, he maintains a positive long-term view based on sustained growth in EVs and energy storage systems.
Overall, analysts agree lithium remains an essential component of the energy transition but warn investors to be prepared for continued volatility as the market evolves.